The Cyprus Property Titanic

The New Bills and Developer Mortgages
Clearly from your public statements, Mr Sylikiotis, you firmly believe that they will solve the Title Deeds scandal. However, many people have grave doubts and accuse you of simply “rearranging the deckchairs on the Titanic”. For example, you have made it possible for a buyer whose developer has defaulted on his own mortgage to get the deeds by paying off the developer’s debt, but who in their right mind would do this and, indeed, why should a buyer have to underwrite someone else’s debt? The government did assure the EU that the new legislation would address the iniquity of developer mortgages making hostages of innocent buyers. Has that assurance been honoured?
On 22 July 2009, you issued an official statement on the Title Deeds scandal in which you said (quote) “…..the ownership status of a buyer-owner of immovable property in Cyprus is definitely secured and cannot be challenged, as long as the buyer-owner has submitted the buying-contract to the Department of Lands and Surveys”. A few days later, in a letter to Graham Watson MEP, you stated (quote) “….. buyers of immovable property are protected, once they deposit the Contract of Sale at the appropriate District Office….”
How does Alpha Bank’s recent action, to liquidate a large number of Liasides properties already paid for by buyers who had lodged their contracts as you advised, square with your 2009 assurances? Alpha are still pressing ahead with the repossession process and your assistant Mr Andreas Assiotis now seems to be saying that properties bought before the new amnesty bills are not fully protected. So, were your 2009 assurances worthless? Are you reneging on your past assurances and now favouring bank creditors at the expense of innocent buyers? If so, what do you imagine the reaction among potential property buyers and other inward investors globally will be? Do you expect that they will be more or less likely to favour Cyprus?
How many properties bought by foreigners have developer mortgages encumbering them? Of the estimated €6bln+ developer mortgage debt held by the banks, what is the current proportion in default? Presumably, in your position, you must know. We have seen Froiber and SNK Developers collapse and now the fallout from the Liasides collapse. We are reliably informed that many ‘big name’ developers are in hock to the banks variously for sums ranging from €200mln to over €500mln and, with virtually zero sales for the past 2-3 years and no prospect of any uplift before at least 2014, their annual capitalized interest repayments are simply beyond their capacity to service. In the event of further developer foreclosures, do you anticipate a spate of repossession activity against innocent buyers, as in the Alpha Bank/Liasides case?

EU Unfair Commercial Practices Directive
Why has there been such reluctance to implement the EU Unfair Commercial Practices Directive which very few people in Cyprus knew about and which at one stage the government was stating wrongly does not apply to immovable property? The CCPS took quite some time to address the issue but a significant number of buyers have lodged complaints with the CCPS under the Directive. It is understood that complainants may well going on to lodge complaints against Cyprus at the European Court of Human Rights. Such has been the avalanche of complaints to MEPs from aggrieved constituents that the European Commission is also investigating more seriously, having previously been fobbed off by blandishments and fake assurances from the Cyprus government.
Will the banks already carrying mortgages on properties with defective deeds under your new scheme take a hit now that market values are dropping? Isn’t the very act of issuing a less than perfect Title Deed a breach of the EU Unfair Commercial Practices Directive? Do you believe that buyers will be more or less likely to buy in Cyprus now?

Unique Complexity of Cyprus Title Deeds System
Cyprus is probably the only country in Europe, if not the whole of the developed world, that (a) does not require by law that Title Deeds are handed over within 7 days of purchase completion and (b) has such a monstrously complex ‘system’ for issue of such deeds, still taking most people 7-15 years which may not be seriously reduced by the new bills as the basic bureaucratic procedures and resources are not changing. Why could you not, as many have demanded, just dispense with the current monster and adopt the simplicity that all other countries enjoy?

Why Should Buyers be Liable for Developers’ Unpaid Taxes?
Prior to implementation of the new bills and the resulting changes, developers (and other vendors) were required to provide a ‘Tax Clearance Certificate’ to the District Lands Office to enable the transfer of ownership of the property to take place. Up to now, if the developer/vendor were unwilling or unable to pay his own outstanding tax bill, the only option available to buyers was to pay the vendor’s tax liabilities themselves to secure ownership of the property.
Has this changed under the revised legislation? If not, do you believe that it is reasonable to expect those buying property to pay the vendor’s tax bill to secure ownership? Why cannot the Inland Revenue Department pursue tax debtors independently rather than trying to burden the innocent parties? Do you believe that making buyers liable for a developer’s taxes increases or decreases the likelihood they will buy in Cyprus?

Why is Property Fraud Treated as a Non-Criminal Offence?
Many people are perplexed by how in Cyprus property fraud is not regarded by the state as being a criminal offence yet Cyprus claims to follow English law and precedents. At the Attorney General’s instruction, the police will not even record complaints from alleged victims let alone carry out an investigation. As far as I know, in all other countries claiming to follow English law, property fraud allegations are automatically treated as criminal offences and subject to police investigation. Why has the government taken this peculiar stance, which in the eyes of foreign buyers and their governments makes it look as if our government is condoning and backing fraudsters and punishing victims of crime?

Cyprus Reputation and New Foreign Buyers
As you yourself have admitted, the scandal over the past 5 years of Title Deeds and various frauds has severely damaged Cyprus’s reputation internationally as a safe and secure place to buy property. For example, MEPs in the UK who have been inundated with complaints from constituents about property problems in Cyprus have demanded that the European Commission take action against Cyprus and the British government take action against Cypriot developers and agents acting illegally in the UK. The Scottish MEP Alyn Smith has gone further and told them not to buy property in Cyprus at all. Is it not the case that your argument that the new bills will cure it all is just not seen as credible by them and increasingly by the EU, as well as by potential new buyers?
In conclusion, I fear that if the Land Registry (which reports to the Interior Minister) decides to back bank creditors in claims against defaulting developers by approving repossessions at the expense of luckless home buyers, it will finally kill any prospect of market recovery for decades to come. Will you act decisively now to stop the rot, Mr Sylikiotis? A public statement from you is in order.